Friday, June 10, 2011

About that surging jobs market


Jobs growth has slowed to a trickle, throwing into doubt budget predictions of an extra 500,000 new jobs over two years and dramatically weakening the case for an interest rate rise.

The latest figures, for May, show a trend rate of job creation of just 1,800 per month - a rate which if continued would add a mere 43,200 jobs to the economy over two years, a mere fraction of the budget projection and nowhere near enough to meet growth in the working age population.

Disturbingly, full-time jobs are in sharp decline vanishing at a trend rate of 3400 per month, a sharp turnaround on the growth of 13,000 per month at the start of the year.

The swiftness in the deterioration of the labour market has taken analysts by surprise.

The April slide of 49,000 full-time jobs reported two days after the budget was dismissed as an aberration. The May figures released yesterday revise it to an even worse loss of 57,000 full-time jobs and add on an extra 22,000 full-time jobs lost in May.

“One month does not a trend make, but two consecutive soft numbers without any feasible excuse other than a lull in demand for labour suggests softness... said RBC Capital Markets strategist Michael Turner.

The Australian dollar slid to a two-week low, slumping almost a cent to 105.88 US cents. The futures market pushed out its best guess as to the time of the next interest rate rise from November 2011 to November 2012 before reigning it back in to mid next year. It is now assigning a zero probability to a rate rise next month.

BT economist Chris Caton said the case for a rate rise was now “close to non-existent”.

“There is a wide gap between how the Bank and Treasury see the momentum of the economy and how it is perceived by many in the parishes,” he said in a note to clients. “The officials may well be right. But the ongoing strength of the the economy is now clearly an open question.”

Australia’s headline unemployment rate remained steady at 4.9 per cent but only when rounded to one decimal place in accordance with Bureau of Statistics conventions. Unrounded, the unemployment rate edged up for the first time in four months climbing from 4.86 to 4.93 per cent.

NSW has led the way down, losing 11,600 jobs in trend terms since January at a time when every other state either created jobs or stayed still.

Victoria gained 8600 jobs over the four months since January, being beaten only by Western Australia which gained 9600.

Victorian Premier Ted Baillieu said the state was doing well despite a seasonally-adjusted unemployment rate which climbed from 4.7 to 5.1 per cent.

“I’ve been at pains to say we have some cautious optimism,’’ he said. ‘‘We need to use the competitive advantages we have.’’

Treasurer Wayne Swan drew comfort from the fact that the national unemployment rate remained below 5 per cent.

“When you’ve got an unemployment rate with a four in front of it that’s still a pretty good outcome,’ he told reporters in Brisbane. “It’s very strong compared to other developed economies.”

NSW the biggest loser

New jobs since January (unemployment rate)

NSW: minus 11,600 (4.9%)
Victoria: +8600 (5.1%)
Queensland: +2500 (5.2%)
Western Australia: +9600 (4.3%)
South Australia: +6400 (5.4%)
Tasmania: steady (5.8%)

Trend jobs growth, seasonally adjusted unemployment rate

Trend jobs growth, seasonally adjusted unemployment rate

Published in today's SMH and Age

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